There are lots of reasons for the explosive growth in private equity.

An obvious one is low interest which makes debt very cheap. Another is the growing pool money pouring in from pension fund, banks and insurance companies desperate for market-beating returns.

But how much are Sarbanes-Oxley and other governance regimes contributing? How much of an incentive are the rigorous corporate governance controls? Is selling out to private equity now more attractive because of the constraints of corporate governance and compliance?



According to David Pitman, a vice-president and director of Boston Consulting Group, there is definitely a SOX effect. When I spoke to him last week, he said Sarbanes-Oxley had changed the equation for many companies.

"Sarbanes-Oxley has done two things," he said. "It's imposed huge costs and it's created a lot of distraction for CEOs and CFOs.

"In addition to that, CEOs and CFOs have another distraction which is the quarterly earnings cycle which is dealing with investors, capital road shows, etcetera.

"Those distractions are to a large part taken away by private equity."

BCG has put out a report What public companies can learn from private equity which maintains that private equity can teach listed corporations several things about growth and running a business.

Lessons include strong alignment between managers and highly sophisticated and well-informed owners, engaged and effective boards with powerful industry expertise, a laser-like focus on creating value within five years and giving managers more equity so that they will behave more like owners.

Just how well that stacks up with corporate governance requirements for public companies is a debate worth having.